Signs of America's Second Great Depression

Jennifer Britt home defense in the Rosedale Park neighborhood of Detroit. Britt and supporters are resisting the eviction by Fannie Mae. (Photo: Abayomi Azikiwe), a photo by Pan-African News Wire File Photos on Flickr.

Signs of America's second Great Depression

By Mike Stathis
Mon Aug 6, 2012 4:54AM GMT
presstv.ir

After having proclaimed the end of “Great Recession” in June 2009, Washington, establishment economists and Wall Street shills continue to insist that the U.S. economy is on the road to recovery. And America’s controlled media has not once questioned this ridiculous claim.[1]

Rather, the media continues to compare economic data to that seen during the first Great Depression. And they insist that the United States avoided another depression as a result of the “triumphant” actions taken by the Federal Reserve and President Obama.

The motive of this scheme has been to undermine the full severity of the current depression. Washington always creates an atmosphere of “optimism” with the intent of boosting consumer confidence. The problem is that those who have been seduced by this deception are subject to more adverse ramifications because they have not adequately prepared for the economic realities facing them.

Although they have cautiously avoided labeling the current period as America’s Second Great Depression, journalists continue to make comparisons to the Great Depression when discussing the severity of the data, and justifiably so. Virtually all economic data has made lows dating back to the Great Depression or since the inception of data collection.

For those who have accepted the establishment’s version of reality, I would like to point out some facts that should demonstrate that the United States is in a depression, although I have shortened this presentation for brevity.

· The real estate collapse in the U.S. is already far worse than that seen during the first Great Depression. For instance, median residential real estate prices have declined by 34% from their peak (reached in mid-2006). In contrast, median real estate prices declined by 31% from their peak during the Great Depression of the 1930s.

· The number of foreclosures and the percentage of foreclosures relative to homeowners are also at record-highs. And foreclosure activity is showing no signs of slowing. With more than two million foreclosed homes on the market and another 4 million in the shadow inventory, the foreclosure boom is certain to continue for many years. Millions of Americans have been waiting for housing prices to strengthen before they put their home on the market. This too promises to keep existing home inventory very high for many years, even when prices begin a definitive upward trend. Finally, tens of millions of baby boomers will scale down to condos, assisted living facilities and move in with relatives over the next two decades, promising to add yet another downward force on pricing.

· Housing starts are the lowest on record. Despite reaching a bottom in 2009, there has been almost no progress in housing starts nearly three years later.

· New home sales are the lowest in U.S. history (302,000 for 2011). This number is even lower than the previous lows recorded in the early-1960s when there were only 190 million Americans, versus 330 million today.

· Home owner’s equity as a percentage of home value is the lowest on record (1946). Once you factor in the current and future expected inventory of foreclosures, as well as the additional factors promising to keep pricing tame for many years to come, the so-called wealth effect (generated by the increase on paper of home values) will continue to remain elusive.


· Fannie Mae was created in 1938 as part of FDR’s New Deal. After seventy years of successful operations, Fannie Mae became insolvent. Thus far, taxpayers have been forced to pony up hundreds of billions of dollars for Fannie’s bailout, yet the mess remains. Washington has been trying to figure out a way to mitigate the Fannie Mae disaster for four years, but still has no solutions.

· Several dominant financial institutions that were able to survive America’s first Great Depression have failed: Bear Stearns, Lehman Brothers, Merrill Lynch, Washington Mutual and AIG; others remain in trouble despite having received enormous bailouts: Citigroup, Bank of America and hundreds of regional banks. [2]

· In 2009, state tax revenues collapsed by 11.8% in the U.S., the largest decline ever. After having depleted funds from the economic stimulus package passed by President Obama in early 2009, states are faltering again. Local governments remain in a much more precarious position. Continued weakness in the real estate market alone will weigh on local and state governments.

· In 2009, U.S. manufacturing activity declined by the largest amount since inception of the data (1946). Manufacturing employment remains lower than any time since 1946. As you can imagine, after WW2, manufacturing activity declined sharply. Today, manufacturing in the defense sector remains robust, as the U.S. continues with its longest and most costly war. But even this has not helped the overall manufacturing sector boost employment from its previous lows in 1946.

· In 2008, Consumer Confidence fell to a 40-year low.


· In 2008 the S&P 500 Index suffered its largest collapse in any calendar year in history at 45.5%, versus 41.9% in 1931 and 38.6% in 1937. This $8 trillion plunge wiped out the possibility of retirement for millions of Americans. Moreover, millions of other Americans were still licking their wounds from the $7 trillion lost nine years earlier when the dotcom bubble popped. The cumulative effect of these two collapses, separated by less than a decade is rarely discussed, but the damage is very real.

· Even before the financial crisis of 2008, America’s public and private pension plans had become underfunded by several trillions of dollars. Today, the situation has become much worse. [3]

· In 2008, major stock market indexes in the United Kingdom, Germany, France, China, India, Brazil, Canada, Australia and Mexico collapsed by more than 50%. [4]

· The global economy shrunk in 2009 for the first time since the Great Depression. [Ibid]

· U.S. Corporate profits collapsed to their lowest level on record (1954) at just 4.5% of GDP for Q4 2008.

The United States has been in decline for several years due to its fascist regime, often referred to as its “two-party system of democratic government.” Instead of tearing this dictatorship down, Americans naively line up to vote each year, thinking things will change, without what has happened in the past.

[1] A recession represents only one economic aspect of a depression. Thus, without realizing it, the U.S. media has actually highlighted the severity of the current depression by reminding everyone that the recession has been extremely severe.

[2] In September 2008, two days after the buyout by Bank of America was announced, I wrote an article (“Bailouts Disguised as Buyouts”) claiming that it was really a bailout orchestrated by the Federal Reserve and U.S. Treasury Department. Because I had been blacklisted by the media, this scam went unnoticed by the public and no one else made any mention of the reality. Two years later, this confession was made by former Bank of America CEO Ken Lewis in Congressional hearings. Within a couple of weeks, Washington Mutual was “seized” by the Office of Thrift Supervision (allegedly) due to “insolvency.” I immediately sent a formal complaint to the Securities and Exchange Commission (SEC) discussing insider trading and massive fraud behind the Washington Mutual takedown. Shortly thereafter, I was interrogated by federal agents. The SEC swept the complaint under the table.

[3] There were no pension plans during the 1930s.

[4] These data confirm that you cannot have a depression in a key nation like the U.S. without it spread to other nations.